Why traditional insurance needs insurtech collaborators

While other industries are awash with new entrants and disruptive technology, urging established players to pick up their game, insurance firms are in somewhat of a technological and cultural rut. 

But, like most industries, the insurance sector has vast potential to be revolutionized in this age of transformation. 

Slick new contenders in insurance, like those entering the world of banking and payments, could bring disruption and renew customer interest, turning what can be an “arcane, policy-led” industry into one that places customers, as individuals, at the heart of what it does.

The benefits of that transformation are rife for both the insurer and its customers, with more accurate risk analysis leading to lower payouts, while new and enhanced products and services would add rich new layers of value and long-term loyalty.

Customers could enjoy tailored advice, real-time rate breakdowns, personalized services, better rewards, and the sense that insurance companies are looking out for their interests, not just taking a gamble on risks.

But, as a report by KPMG notes, transformation in the insurance sector will “not be about digitizing the business”. It will be about a new way of working which doesn’t just present risk, “but brings positive energy, new opportunities, and rewarding outcomes.”   

So why is the insurance sector at large so reluctant to move beyond ‘tinkering’ to embrace new models and technology at their disposal wholeheartedly? 

Legacy infrastructure and no ‘burning platform’

For large insurance companies, long shrouded in commitments to security, data protection, and industry regulations, repositioning in this way is a task of Herculean proportions. 

Michael Niddam is an Executive Partner at Kamet, a start-up studio that creates companies in the health, insurance, protection and assistance space, and he believes established, corporate insurance firms face inherent barriers. 

“Most of them, if not all, are built on massive technological domains that are organized in silos by line of business, departments, and customers,” said Michael Niddam, Executive Partner at Kamet, told TechHQ. 

“That doesn’t offer the flexibility that is required to really test and learn and new approaches, which is absolutely mandatory in high tech innovation.”

Aside from the infrastructural challenges, Niddam also believes that the insurance doesn’t face the same pressures as its counterparts in banking or retail, for example, to commit to full-blown, business-wide transformation. 

“In order to innovate and change, you need a burning platform”, he told us. That’s a situation or set of circumstances that pressure a business or industry to fundamentally change. 

But insurance companies, by necessity, are fortified to ride out economic downturns, they are protected from shutdowns— their security and accountability to meet unexpected payout demands are great for society, but ultimately makes change a begrudging task. 

This combination of factors makes it “extremely difficult to challenge existing projects from the inside.” 

The insurtech incubator fostering collaborators

Kamet was launched with £100 million (US$129 million) backing from French multinational insurance giant AXA. Niddam is one of group’s entrepreneurial founders, alongside Stephane Guinet and Nicolas Bosc— both former AXA executives themselves. 

That initial funding has allowed the incubator to invest in 20 diverse insurtech and healthtech startups— its “sweet spot”— from the likes of Air Doctor, a platform that connects travelers to medical professionals while abroad, to TrueNorth, which uses devices in freight containers to automate claims in the shipping industry. 

Given the founders’ backgrounds, and the origin of its financing, Niddam said Kamet has “strong incentives” to develop companies that are attractive to AXA, but that’s not the group’s mission— the company remains “independent and autonomous” from its original benefactor. 

Instead, with traditional incumbents struggling to transform from the inside, Kamet believes the future of the insurance market lies in collaboration between those corporations with established market share and reach, and new tech-driven startups, the likes of which it is fostering. 

“The future is of cooperation between large corporates that need to reinvent themselves— but have massive commitments such as security, data protection at risk— with agile tech companies,” said Niddam. 

“These can bring many disruptions to the insurance field, such as the ability to develop and progress much more nimbly, faster, and closer to the consumer in a way which is blocked today by legacy systems and approaches to insurance, such as regulation.”

Built on partnerships like these, where new tech solutions work closely with industry stalwarts, insurance firms can harness the power of data to make the world of insurance “better”. 

That would not only help insurers price more accurately and effectively but enhance their approach to risk management; ultimately, these relationships could help us move from an insurance industry that promises to take the customer back if there has been a problem, to one that helps its customers not to encounter that problem in the first place.

And, as represented by Kamet’s rich and diverse portfolio, that ‘problem’ could be anything from fraud, health issues, accidents abroad or damage to a home.

“There will be much more, real-time usage of data, and the ability to access an ecosystem of providers that are currently out of the reach of traditional insurance companies that would need significant innovations,” Niddam said on the future of insurance.  

“I don’t believe traditional insurance can put those offers together in an effective manner on their own, but together with startups and innovators, I could see very promising avenues of innovation franchise.

Kamet is nowhere near the end of its journey, and despite an existing portfolio of 20 startups, Niddam believes there is plenty more to be developed today and claims the firm has no shortage of ideas, but it’s looking to invest in the right people to realize them. 

“What we are looking for is actually entrepreneurs that can partner with us to give life to our projects.”

The long-established insurance market must brace for change and accept a new wave of startups that could hold the key to effective transformation. The benefits won’t just be on the balance sheets, they will be felt by the customer, and individuals and society will be better as a result.